Development of policyholder taxation: outline of changes

FA71 prepared the ground for the abolition of surtax and introduction in 1973 of the ‘unified system’, basic rate and higher rate bands

FA75 brought about four changes of significance

prior certification of policies as qualifying, as the system was so complex

introduction of a tax deferral rule for partial surrenders or assignments that do not exceed the aggregate of an annual ‘allowance’ of 5% of premiums paid, on a rolling basis

clarification of the rules that operate where one policy is replaced by another or there is a significant variation in policy terms - ICTA88/SCH15/PARA17 and ICT88/SCH15/PARA18 in relation to policies containing options

abolished life assurance premium relief by deduction, and consequently most premium relief, for new or amended policies

made changes to the rules governing policies issued by non-UK resident insurers

FA89 introduced a chargeable event gain charge on companies

FA97 ensured that gains on so-called guaranteed income bonds are taxed under the chargeable event gains regime, rather than as interest or annual payments

FA98

introduced the legislation preparing the ground for the 1999 Personal Portfolio Bond regulations designed to make an annual charge on insurance bonds whose assets are chosen by the investor (following the case of CIR v Willoughby, 70TC57)

provided new rules dividing gains between co-owners of a policy, and co-settlors where a policy is held on trust